Housing fund to tap into boom
A new investment company that will invest solely in residential properties is likely to be floated early next year.
The investment vehicle will be offered through Dunn Funds which has been set up by Martin Dunn, the principal of Auckland real estate agency City Sales.
Dunn said he had set up Dunn Funds to offer a residential property investment vehicle to the public and said he hoped to launch it in February, but was unwilling to give details until the prospectus was released.
However Dunn has been working on the proposal for at least three years and industry insiders said it would likely take the form of a company that would pool retail investors' funds to acquire standalone houses in the booming Auckland market, as a long-term hold.
A number of such companies could be set up under the Dunn Funds banner and each one would probably own a relatively small portfolio of houses to provide investors with diversification by location and property type, sources said.
Online advertising material for the venture invites potential investors to register their interest ahead of the official launch. It said the minimum investment would be $25,000 and each investment company would purchase up to 10 houses.
Industry sources said they expected the companies to carry little debt, meaning they would probably be relatively low-yielding compared to many other investment classes.
It is not yet known whether shares in the individual companies would be able to be traded through a facility such as the Unlisted platform.
City Sales specialises in the Auckland apartment market, which is dominated by investors, however it is understood that the Dunn Funds companies will steer clear of apartments in favour of suburban houses.
City Sales also has a substantial property management arm, so it is likely that it would be contracted to manage the Dunn Funds' companies' rental property portfolios as well.
The plan comes at a time when residential property prices in Auckland have been going through the roof.
The REINZ/Fairfax Media Housing Market Report released last week, showed that median selling prices in many of the city's suburbs had increased by more than 20 per cent in the three months to November, compared to the same period last year and rises of more than 30 per cent were not uncommon.
Although residential rents in the city had also been increasing, they had generally lagged well behind rising property prices, making it increasingly difficult for investors to find properties that could provide an acceptable return.
Dunn would not discuss Dunn Funds likely investment strategy of the new offering, but given New Zealanders' love affair with residential property as an investment, it may attract considerable interest from those wanting a stake in the property market but who wanted to avoid the hassle and cost of buying directly.
- Sunday Star Times